Brad Feld Reviews The Lights in the Tunnel_3 potx

Acceleration / 99 CopyrightedMaterial–Paperback/Kindle available @ Amazon require low and moderately skilled workers are being computerized, tomorrow it will be jobs performed by highlyskilledandeducatedworkers.Indeed,thisisalready happening among information technology professionals, where jobs that once requiredcollege degreesare simply vanishingintothecomputernetwork. Greenspan’ssuggestedsolutionisthatwedramatical- ly improve our elementary and secondary education sys- tems.WhilethatisagoalthatIcertainlysupport,theidea thatitwillsolvetheproblemissimplynotarealisticex- pectation.Even ifwe couldwavea magicwandand im- prove educationin theUnited States overnight,it would obviouslybeyearsbeforethosechildrenenterthework- force.Inthemeantime,computertechnologywillcontin- ueitsrelentlessadvance.ThesubtitleofChairmanGreen- span’sbookis“AdventuresinaNewWorld.”However,it appearsthat,likemosteconomists,hehasfailedtoperce- ivejusthownewthatworldreallyis. The reality is that the Luddite fallacy amounts to nothing more than a historical observation. Since things haveworkedoutsofar,economistsassumethattheywill always work out. For centuries, machines have conti- nuously become more sophisticated, and as a result, the productivity—and therefore the wages—of the average worker have increased. It stands to reason that if this processcontinuesindefinitely,atsomepointthemachines willbecomeautonomous, and the worker willno longer addvalue.Longbeforethatextremityisreached,however, theremustcomeatippingpointatwhichjoblossesfrom automation begin to overwhelm any positive impact on THE LIGHTS IN THE TUNNEL / 100 CopyrightedMaterial–Paperback/Kindle available @ Amazon employment from lower prices and increased consumer demand. (For more on this, please see pages 131-138 in Chapter 3). In light of unprecedented, geometrically ad- vancingcomputertechnology, theLuddite“fallacy” does notreallylookallthatfallacious. A More Ambitious View of Future Technologi- cal Progress: The Singularity Inthis book, I have been quite conservativeintermsof projectingwheretechnologymaytakeus.Ihavespokenof robotsthatmayeventuallymanagetostockstoreshelves and of other robots that might be remotely controlled fromlowwagecountries.Ihavenotspokenofarmiesof marauding, humanoid robots, orofintelligentcomputers taking control of nuclear weapons. Partly, the reason is thatIwanttocomeacrossasverydowntoearth.Iwant you to take this book seriously. A second reason is that none of thosescience fiction-like scenarios areatall ne- cessary. Technology—if we do not prepare for it—does not need to directly or physically attack us to cause us greatharm.Theonlythingitneedstodoistakeourjobs. Nonetheless,IwouldberemissifIdidn’tincludethe fact that many extremely well regarded individuals with deepexperienceinscienceandtechnologyhaveafarmore ambitious view of what is ultimately possible. World- renowned cosmologist and author of the book, A Brief History of Time, Stephen Hawking, has said, “Computers arelikelytoovertakehumansinintelligenceatsomepoint in the next hundred years.” 35  Inventor and author Ray Kurzweil,whoreceivedtheNationalMedalofTechnology Acceleration / 101 CopyrightedMaterial–Paperback/Kindle available @ Amazon fromPresidentClintonin1999,isfarmoreoptimisticand predicts that machines will achieve true intelligence by 2029. Kurzweilisalsooneoftheleadingproponentsofthe technologicalsingularity,whichheexpectstooccurbytheyear 2045. 36  This concept, which was originally introduced by the mathematician and author Vernor Vinge, 37  suggests that at some point in the future, technological progress willsimplyexplodeincomprehensibly.Basically,thingswill justgetawayfromus.Ifyoulookatthenowfamiliarchart that follows, thetechnological singularity would occurat somepointclosetowherethelinebecomesnearlyvertical. Beyondthispoint,itisjuststraightup.   The Technological Singularity           Manypeoplehavepostulatedthatthesingularitywill bebroughtonwhenmachinesfinallybecomesmarterthan us, andthen applythathigher intelligence to thetask of Technology Time Singularity THE LIGHTS IN THE TUNNEL / 102 CopyrightedMaterial–Paperback/Kindle available @ Amazon designing even better versions of themselves. After that, humanbeingswouldnolongerbeabletounderstandthe progresstakingplace. It seems obvious that if the singularity does indeed takeplace,nearlyallofuscouldpotentiallybeoutofajob. People with PhDs from top universities could well find themselves in the same boat as autoworkers in Detroit. Howcouldtheaveragepeoplewhomakeupthebulkof ourpopulationearnalivinginaworldinwhichmachines weresmarterandmorecapablethaneventhemostintelli- genthumans? Aside from the issue of providing essential support forthepopulation,thesingularityintroducesamorebasic economicparadox.Inafree marketeconomy,nothingis producedunlessthereisdemand—and“demand”ineco- nomic terms means desire combined with the ability to pay.Thereisnoincentivetoproduceproductsifthereare noconsumerswithsufficientdiscretionaryincometopur- chase those products. This istrueevenif intelligent ma- chinessomedaybecomesuper-efficientproducers.Ifaver- age—or even exceptional—human beings are unable to find employment within their capabilities, then how will they acquire the income necessary to create the demand thatinturndrivesproduction?Ifweconsiderthesingular- ityinthiscontext,thenisitreallysomethingthatwillnec- essarilypushusforwardexponentially?Orcoulditinac- tualityleadtorapideconomicdecline? *    * Thetechnologistswhospeculateaboutthesingularitydon’tseemtoo concerned about this problem. Perhaps they assume that the super- intelligentmachinesofthefuturewillfigureallthisoutforus.How- Acceleration / 103 CopyrightedMaterial–Paperback/Kindle available @ Amazon Inthisbook,wewon’tagainstrayintothismorespe- culativearena(exceptinthelastsectionsoftheAppendix). Theideaspresentedinthisbookdonotdependontheoc- currenceofthetechnologicalsingularity.Thestandardwe have set is much lower: we areconcerned only withthe possibilitythatmachineswillbecomecapableofperform- ingmostaverage,routinejobs.Thesingularityrepresentsa far more extreme case. It’s fair to say, however, that if something along the lines ofthetechnologicalsingularity istooccur,wemayfirstneedaparadigmshiftintheway oureconomyworks—oratleastsomechangesinoureco- nomic architecture. Otherwise, we will be in for quite a shock. A War on Technology Inthischapterwehaveseenthatcomputersareincreasing in both power and number at a simply astonishing rate. We’velookedatclearevidencethatshowswehaveessen- tiallyhittheceilingintermsofwhatwecanexpectfrom futureincreasesinthecapabilityofaveragehumanbeings. We’ve also looked at a variety of specific job types and technologiesandshownhowautomationislikelytohavea much broader impact than many of us might imagine— andalsohowthejobsofmanyhighlypaidandhighlyedu-   ever, if something other than consumer demand drives production, then we no longer have a market economy; we will then have a plannedeconomy.TheSovietUnion,ofcourse,didn’thaveintelligent machines—but they did have lots ofvery intelligent mathematicians staffinganagencycalledGosplan,whichattemptedtofigurethingsout. Let’shopethemachineswilldoabetterjob.(Pleasesee“TheTech- nologyParadox”intheAppendixformoreonthis.) THE LIGHTS IN THE TUNNEL / 104 CopyrightedMaterial–Paperback/Kindle available @ Amazon cated workers may be among the most vulnerable. Let’s lookagainattheassumptionwesetouttotestatthebe- ginningofthischapter: Technologywillnotadvancetothepointwherethebulkofjobsper- formed by typical people will be automated before the year 2089. Priortothatyear,theeconomywillalwayscreatejobsthatarewithin thecapabilitiesofthevastmajorityofthehumanpopulation. Atthispoint,itseemsverydifficulttosupportthisas- sumption. Most of the trends we have reviewed in this chapter are likelyto come into play long before ourcutoff dateof2089.Itisverypossiblethatevenadvancednano- technologywouldbeavailablewithinthattimeframe.We therefore cannot escapethe conclusion that we will very likelyhavetodealwiththeimpactofacross-the-boardau- tomationinour lifetimes, orat theveryleast, within the lifetimesofourchildren. Ifwedonothaveastrategy—andspecificpolicies— in place to deal with this issue before its full impact ar- rives,theoutcomewillbedecidedlynegative.Asthetrend towardsystemicjoblossincreases,itisquiteeasytofore- see a number of possible ramifications. I have already mentionedthelikelihood ofadropincollegeenrollment and a migration toward safer trade jobs. Another trend thatwillsurelyoccurasrecognitionsetsinwillbeagener- al“warontechnology.”Workersinvirtuallyeveryoccupa- tion—evenmanyofthosewhothemselvesworkintech- nical fields—will desperately, and quite understandably, attempttoprotecttheirlivelihoods. Acceleration / 105 CopyrightedMaterial–Paperback/Kindle available @ Amazon Wecanexpectsubstantialpressureongovernmentto somehowrestricttechnologicalprogressandjobautoma- tion.Itispossiblethattherewillbeasignificant,last-ditch resurgence in the power of organized labor. Workers in jobs and industries that are not now organized will very possiblyturntounionsinanattempttoexertsomepower overtheirownfutures.Theresultislikelytobesomewhat slowedtechnicalprogress,workstoppages,andsignificant economicandsocialdisruptions. The economists who believe in the premise of the Ludditefallacyarenotwrongaboutonething:technologi- cal advancement is the only thing thatcan, over the long term,driveustowardcontinuingeconomicgrowth.Con- tinuingtechnicalprogressisouronlyhopeforawealthier societyinthefuture. We know that in the coming decades, we will face enormousnewchallenges.Mostnotablewillbetherelated issuesofincreasingenergyscarcityandclimatechange.We arelikelytofaceawide-rangingimpactonclimate,agricul- tureandevengeography—includingthepossibilityofris- ingoceanlevelsthatcouldresultinhumanitariandisasters ofunimaginableproportions.Asweareallaware,current- lytheeffortstomitigateglobalwarmingandtheotherim- portant environmental impacts from burning fossil fuels areenjoying verylimitedsuccess.Theunfortunatereality isthatwemayultimatelybeforcedtoacceptthefactthat wewillfail—atleasttosomedegree—inourquesttostop climate change. But the costs associated with somehow adapting to those changes will be astronomical. At the same time, reservesofoil,natural gas, and in the longer THE LIGHTS IN THE TUNNEL / 106 CopyrightedMaterial–Paperback/Kindle available @ Amazon runevencoal,aregoingtobedepleted.Howcanwehope toface thesechallengesifoureconomyisindecline and the bulk of our population is focused almost exclusively onthecontinuityofindividualincomes? Asimilarpointcanbemaderegardingtheglobalwar onpoverty.Howcanwehopetowinthiswar,ifweour- selvesarenotprosperous?Weknowthatpovertyisoneof the primary drivers of war, conflict and terrorism. In a long-term stagnant or declining economic environment, theseproblemswillonlygrow. Theanswercannotbetoattempttohalttechnological progress. The problem is not with technology; it is with our economic system, and it lies specifically in that sys- tem’sinabilitytocontinuethrivinginthenewrealitythatis being created. It will be extraordinarily difficult to make materialchangestothatsystembecauseithasservedusso well,forsolong.Nonetheless,inthefinalchaptersofthis book,IwillsuggestsomechangesthatIbelievewillallow us to move from fearing technology to leveraging it as neverbeforeandthendeployingitagainstthechallenges wewill face. Before then, however,we must move from ourtunnelsimulationback intotherealworld.Therewe willseethatthesituationisprobablyfarmoredangerous andperhapsmoreimmediatethanwehaveyetimagined.  CopyrightedMaterial– Paperback/Kindle available @ Amazon Chapter 3 DANGER   In the first chapter of this book, our tunnel simulation showedthat,aslargenumbersofworkerswereautomated out of their jobs, theeconomy would eventuallygo into declinebecauseeachworkerisalsoaconsumer(andmay supportotherconsumers)inthemassmarket.Inthereal world, it seems very likely that the automation process wouldbea fairlygradualone.Can weassume,therefore, thattheeconomicimpactofthistransitionwouldalsobe gradual in nature and might not be apparent until some pointinthedistantfuture?Toanswerthisquestion,let’s lookathowmarketsworkintherealworld. The Predictive Nature of Markets Oneofthemoreinterestingdevelopmentstoariseoutof theInternethasbeentheappearanceofonlineprediction markets. A predictionmarket is really just another name forabettingmarket,anditoperatesinasimilarfashionto thefuturesmarketsthatallowtraderstoplacebetsonthe futuredirectionofthingslikeoilpricesandstockmarket indexes.Prediction markets, such as theIowa Electronic Markets(IEM) andIntrade,allowparticipantstobetreal THE LIGHTS IN THE TUNNEL / 108 CopyrightedMaterial–Paperback/Kindle available @ Amazon money on things like elections, economic developments (suchasrecessions),orspecificeventsin thebusinessor entertainmentworlds. While prediction markets are specifically set up to predict future events, we know that we can expand this ideaandsaythatallfreemarketsare,inessence,prediction markets.Ifyoubuyaparticularcompany’sstock,thenyou areplacingabetthat,inthefuture,thatstockwilltradeat ahighervalue.Collectively,themillionsofparticipantsin theworld’sstockmarketsoftenactasasortofpredictive barometer for the economy as a whole. Historically, the U.S.stockmarkethasoftenanticipatedrecessions bysix monthsorso.Likewise,recoveryfromarecessionisvery oftenprecededbyariseinthestockmarket. This predictive feature also applies to all the other various markets with which we interact, including the housingmarket,thejobmarket,andthemassmarketfor goods and services. The reason is quite obvious. People arerational beingsand every individual, to some degree, incorporateshisorherexpectationsforthefutureintohis orhercurrentactions.Ifyouexpectthatyouwillreceivea largesumofmoneyatsomepointinthenearfuture,you areverylikelytobeginspendingsomeofthatmoneyeven beforeyouactuallyreceiveit. Nowwecanbegintoseeapotentialproblem.Asau- tomationbeginstoeliminatejobsinanincreasinglywide rangeofindustriesandoccupations,itsimpactsareclearly notgoingtobekeptasecret.Peoplewillbecomeawareof what is happening—even ifit is notofficially recognized bygovernments—andtheywillbegintomodifytheircur- [...]... @ Amazon THE LIGHTS IN THE TUNNEL / 114 saving Consumers in the United States are expected to continue powering the factories in China and other developing nations even as the jobs from which those consumers derive their income evaporate.* This is clearly unsustainable This danger—together with the fact that the benefits from offshoring in the third world are likely to be only transitory since automation... exports, the major factor propping up the Chinese economy is the continuing enormous investment in infrastructure Clearly however, this level of spending is not sustainable indefinitely Many analysts have called for China to stimulate its domestic demand in order to help make up for this decline in demand for exports In reality, this will be very difficult The majority of the products produced in Chinese... example The question is whether that business model is sustainable I would argue that, especially in the automotive market, the company will ultimately have to introduce more automation to meet the quality standards required in export markets It’s also worth noting that such a business model could be sustained in the long run only if wages in China remain extremely low indefinitely If that is the case,... dwindles in the West—and certainly if the catastrophic event described at the beginning of this chapter occurs—then this economic perpetual motion machine is going to collapse Given all this, what can we really say about the future of China? Nearly a fourth of the world’s population lives in China; therefore, there is no doubt that this country will continue to have significant, and perhaps increasing,... irreversible elimination of jobs.* The reality is that the manufacturing sector is following the same path In her book, Rivoli also cites evidence showing that many of the jobs lost in the U.S textile industry are in fact due to machine automation rather than globalization, and that China, in spite of its low wage Cotton farming in poor countries, of course, remains highly labor intensive However, this should... cannot win If I am even partly correct in this projection, then the ramifications for the rest of the world will be enormous In the West, we look to the impending economic might of China with mixed emotions On the one hand, we worry about all that power residing in a country that may well continue to be essentially undemocratic for the foreseeable future On the other hand, many of our hopes for the future... disruptive force in the global automotive market at some point in the not too distant future For all this, automation will be essential The large industrial corporations in the United States, Germany and Japan that provide this automation technology are certainly salivating at the prospect of the future market that China will provide The Chinese government, meanwhile, is focused on insuring that as much... talking about here is really not the same as what occurs in the normal business cycle In a typical recession, many consumers will also cut back on spending as they worry about losing their jobs, and this will tend to deepen the downturn However, this worry is predominantly a short-term concern because people realize that, in the long run, when the economy recovers, businesses will have to again begin... unemployment problem and the Chinese propensity to save rather than consume However, local consumption will be increasingly essential because the primary incentives which drive the private sector to locate manufacturing in countries like China are likely to shift dramatically in the coming decades The Future of Manufacturing Recent years have seen a mass migration of manufacturing to developing countries Low... 118 take a per-capita income that is somewhat comparable to that of developed nations and then multiply it by some huge fraction of the Chinese population In other words, they assume that a very significant percentage of the 1.3 billion people in China are going to be dragged into the middle class And, the primary force that will do that dragging is going to be the ever-expanding employment of hundreds . Amazon saving. Consumers in the United States are expected to continuepowering the factories in Chinaandotherdevel- opingnationsevenas the jobsfromwhichthoseconsum- ers derive their. well find themselves in the same boat as autoworkers in Detroit. Howcould the averagepeoplewhomakeup the bulkof ourpopulationearnaliving in aworld in whichmachines weresmarterandmorecapablethaneven the mostintelli- genthumans? Aside. to find employment within their capabilities, then how will they acquire the income necessary to create the demand that in turndrivesproduction?Ifweconsider the singular- ity in thiscontext,thenisitreallysomethingthatwillnec- essarilypushusforwardexponentially?Orcouldit in ac- tualityleadtorapideconomicdecline? *    * The technologistswhospeculateabout the singularitydon’tseemtoo concerned